Car buyers get ready for the second round of price increases this year. Automobile giant Maruti Udyog Ltd has decided to raise the prices of all its models by 3-3.5 per cent either by the end of July or early August. Other automobile manufacturers like Hyundai and Telco are also planning to raise prices.

“With a 3 per cent rise, car prices could increase by Rs 10,000-Rs 20,000 depending on the model,” said sources in Maruti Udyog.

The rise comes with the slight blip in car sales in May and June, after a slump in year-on-year sales in April. Cumulative car sales in the first quarter (April-June) have risen 3.4 per cent over the
corresponding period of the previous year.

Industry sources say there could be one or two more rounds of price increases this year. This will be done in a phased manner as car companies test the limits of what the market can bear.

“The cost of a car has to take into account the 32 per cent excise duty and the 12 per cent sales tax on the total cost. In addition, there is a 35 per cent import duty on components.

Claims by some companies that they have achieved 100 per cent indigenisation should be taken with a bag of salt,” a senior executive at Hyundai Motor said.

“The cost at which a car is delivered to the customer at the showroom is actually 40-50 per cent less than the actual cost of production. If we raise prices at one go to neutralise our loss, car sales will halve,” he added.

“The price hike by Maruti was always on the cards,” said a senior executive with Maruti Udyog.

“The ex-showroom price of a car now only covers 55 per cent of the total cost of production. This is true for all the car manufacturers. This is why we try to raise price hike in phases. One has to remember that the purchasing power of people is increasing as pay packets become heftier.”

The last round of increases took place in May, triggered by Maruti which raised prices of its models by 0.1 per cent to 1.5 per cent.

A week before the May price increases, Maruti Udyog chairman and managing director Jagdish Khattar had told The Telegraph that it had become impossible to keep prices down because of the all-round rise in input prices.

Moreover, the slump in demand had ratcheted up competition in the car segment.

Most car companies have been wallowing in losses. Maruti Udyog reportedly suffered a Rs 200-crore loss in 2000-01 against a profit of Rs 300 crore in the previous year.

Passenger car manufacturers have been under pressure to raise the prices of their various models as the cost of production has shot up during the last couple of years.

While raising the price of the models in May, Maruti had extended the warranty from one year to two years and 40,000 kilometres, whichever is less.

The price of Maruti 800 Standard model had been raised by Rs 5,501. While prices of three variants of Zen have
been increased by Rs 5,001. The price of Alto had been raised by Rs 4,001.

CSE WEIGHS LEGAL MOVE AGAINST DSQ

BY ANIEK PAUL

Calcutta, July 21:

After the Securities and Exchange Board of India, it is now the turn of the Calcutta Stock Exchange (CSE) to haul up DSQ Software.

CSE will initiate criminal proceedings against the Dinesh Dalmia-promoted company for
attempting to defraud the exchange.

The bourse’s complaint revolves around the 10 lakh DSQ shares deposited with the exchange in physical form by Harish Chandra Biyani, one of the key defaulters in the payment crisis that gripped the bourse early this year, to repay his dues to the bourse.

These shares, bearing folio numbers 43250001 to 44250000, were issued by the Chennai-based company to New Vision Investment (Pvt) Ltd, New Delhi, in connection with its now-quashed acquisition of Fortuna Technologies.

DSQ Software had entered into an agreement with three Mauritius-based companies — New Vision Investment, Softee Corporation and Technology Trust — to acquire their stakes in Fortuna Technologies, for which it issued 1.4 crore shares to the three overseas corporate bodies (OCBs) at Rs 685 per share.

A Sebi probe into the preferential allotment has revealed that the 10 lakh shares issued to the Delhi-based New Vision Investment (Pvt) Ltd were part of the 1.4 crore shares issued under the deal to acquire Fortuna Technologies, but the company did not exist at its registered Delhi address.

However, when CSE lodged the 10 lakh shares with DSQ Software for transfer and dematerialisation in April, the company had acknowledged the validity of the shares, and had also undertaken to transfer and dematerialise them in favour of the bourse.

CSE executive director Tapas Datta said the bourse will initiate criminal proceedings against Dalmia and his company for attempting to cheat the exchange.

“We will also sue Biyani for lodging the dubious shares with the exchange,” Datta added.

Biyani Securities, Biyani’s broking firm, was the intermediary involved in the
placement of the shares with the Delhi-based firm.

The shares were submitted with the exchange by Biyani at the end of March, when the scrip was priced around Rs 120.

Datta said the bourse may suspend trading in the stock if other exchanges agree to do
so. The National Stock Exchange (NSE) has already notified that trading in the stock would be
suspended from July 27, and the Bombay Stock Exchange, too, is reportedly thinking on similar lines, but has not taken a final decision.

Datta said, “We will seek a clarification on the matter from Sebi and the two exchanges on Monday.”

The shares issued by DSQ Software under the preferential allotment been listed on the regional exchanges, CSE and the Chennai Stock Exchange, but the NSE refused to list them.

Instead, the NSE, suspecting irregularities, tipped off Sebi. The market regulator on Friday barred Dalmia from accessing the capital markets for one year, and has also prohibited him from dealing in securities during the ban.

However, it did not clarify in its order whether the company’s shares can continue to be traded on the bourses.

PSU TRIO IN NEPAL TELECOM VENTURE

FROM OUR CORRESPONDENT

New Delhi, July 21:

A consortium of three state-owned public sector telecom companies have joined hands with Nepal Ventures Private Ltd (NVPL) to offer telephony services in Nepal, based on the wireless in local loop technology.

The consortium, comprising Videsh Sanchar Nigam Ltd (VSNL), Mahanagar Telephone Nigam Ltd (MTNL) and Telecommunications Consultants India Ltd (TCIL), plan to set up a joint venture along with NVPL, to be called United Telecom Ltd. While VSNL and TCIL will hold 26.66 per cent each, MTNL will have 26.68 per cent and NVPL 20 per cent in the venture. The joint venture will provide basic, cellular and paging services in Nepal.

“We can provide low-cost telecom services in Nepal. The market there will have a steady flow of revenue, which, in all possibility, may not come from the domestic customers there, but from the large number of tourists and trekkers,” VSNL sources said. Moreover, since the department of telecommunications will have no say in the consortium, UTL will be able to respond to market conditions.

UTL is targeting a subscriber base of more than 50,000 in the first year of operations. “We plan to start our services early next year. We will set up a network to cover 1.5 lakh subscribers across 10 important cities of Nepal in the first three years of operations,” sources said.